Mauro Products distributes a single product, a woven basket whose selling price is $12 per unit and whose variable expense is $9 per unit. The company’s monthly fixed expense is $5,700. Required:
1. Calculate the company’s break-even point in unit sales.
2. Calculate the company’s break-even point in dollar sales. (Do not round intermediate calculations.)
3. If the company's fixed expenses increase by $600, what would become the new break-even point in unit sales? In dollar sales? (Do not round intermediate calculations.)
Break even point (Units) = Fixed costs / Contribution per unit
Break even point (Sales) = Fixed costs / Profit volume ratio (PVR)
Contribution per unit = Sale price per unit - Variable cost per unit
PVR = Contribution per unit / Sale price per unit
Sale price per unit = $12
Variable cost per unit = $9
Contribution per unit= Sale price per unit - Variable cost per unit
= $12 - $9
= $3
Profit volume ratio (PVR) = Contribution per unit / Sale price per unit
= $3 / $12
= 0.25
1.Break even point (Units) = Fixed costs / Contribution per unit
= $5700 / $3
= 1900 units
2. Break even point (Sales) = Fixed costs / Profit volume ratio (PVR)
= $5700 / 0.25
= $22,800
3. Revised fixed expenses = $5700 + $600
= $6300
Break even point (Units) = Fixed costs / Contribution per unit
= $6300 / $3
= 2100 units
Break even point (Sales) = Fixed costs / Profit volume ratio (PVR)
= $6300 / 0.25
= $25,200
Mauro Products distributes a single product, a woven basket whose selling price is $12 per unit...
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